Michigan auto insurance rates going up

Michigan motorists will pay $20 more per vehicle for unlimited medical coverage in their auto policies, $104.58 to $124.89 effective July 1, the Michigan Catastrophic Claims Association decided Monday.

The MCCA, created in 1978, is a risk pool that reimburses auto insurers for medical and long-term disability claims that exceed $460,000. In a statement, the association said "the assessment increased this year primarily because investment returns decreased during the last year while claim costs continued to increase."

Michigan is the only state with unlimited lifetime medical coverage for auto accident victims. In most states, health coverage is optional. In states where coverage is mandated, New York has the highest coverage limit, $50,000.

In 2008, when the stock markets tanked by more than 40 percent, the MCCA paid out $724 million in claims costs. The new $124 assessment includes $101 to handle claims and $24 to address an estimated deficit of $2.2 billion, or nearly $323 per insured vehicle. The assessment was highest in 2005 when it was set at more than $141 per vehicle. Since 1979, there have more than 23,100 claims. The MCCA expects to receive 1,050 new claims during the upcoming period from July 1 through June 30, 2010.

The MCCA bases its assessment on estimated claims, medical inflation, investment returns and life expectancies. In her State of the State address, Gov. Jennifer Granholm called in insurance companies to freeze rates this year so lawmakers could address reforms designed to lower costs.

Jason Moon, spokesman for the state Office of Financial and Insurance Regulation, called the MCCA's decision "unfortunate." The administration backs legislation that would open the MCCA to greater public scrutiny. Industry officials note that the state's top insurance regulator, Ken Ross, is a non-voting member of the MCCA board.

Seeking to lower the overall cost of car insurance in urban areas where rates are typically higher, some Democratic lawmakers have proposed making unlimited medical coverage an option. Motorists who opt out thus would avoid paying most of the MCCA assessment. Mandatory personal injury protection would be capped at $50,000, a level that cover 94 percent of personal injuries.

The insurance industry backs making the MCCA optional and has also proposed that auto accident care be reimbursed on a fee schedule similar to rates paid by workers compensation insurance. Insurers are also seeking more timely billing by health care providers.

Twice in the 1990s, voters rejected attempts to scuttle mandatory unlimited medical for auto accident victims. Dyck Van Koevering, an attorney with the Insurance Institute of Michigan, says "in exchange for unlimited lifetime benefits," the MCCA is "the best bet out there."